The States With The Worst Income Inequality

There was never any chance that in America income would be distributed like it was supposedly done in the Soviet Union – to each according to his ability and his needs. If capitalism is the key to the rise of the US economy, then the concept that some people can be richer than others is near the heart of the system. Americans worship self-made billionaires such as Bill Gates and Warren Buffett because they believe that it’s possible for them to be that wealthy too.

Unfortunately, there are far more poor people than wealthy ones. America is the world’s most visible case of that. A small number of people in the US control most of the income, wealth, and property. More than one in eight people live below the poverty level and that number has grown recently. No matter what the government has done to bridge the difference between the groups, it has been ineffective, and that situation is not likely to change given the current tax laws. The wealthy have a higher tax rate, but even what they keep after taxes is far in excess of what most other Americans have.

24/7 Wall St. looked at the wealth gap by state to find those where the gulf between the rich and poor is the greatest. The formula used to reach this conclusion is a mathematical one called the Gini coefficient. It is a complex calculation which has on the one end of its measurement a world in which everyone makes exactly the same amount of money and on the other a collection of people where the gulf between the haves and have nots is high. The Marxian ideal is a “zero,” and a state in which one group possesses all the wealth and another has none would be “one.” The state in which the inequality is greatest in America, New York, is 0.5. Global statistics show that in come countries, the figure is as high as 0.7.

24/7 Wall St. took the 50 states and measured them according to the percentage of people below the poverty line and the percentage of people who earn more than $200,000. For comparison purposes, we also examined the median household income of each state as of 2009. The $200,000+ level is the highest wealth division of income considered by the Census. Only 3.8% of all households have incomes of $200,000 or more a year, which by itself shows how much wealth is distributed at the higher end of the income scale.

The history of US income inequality, as the Census tracks it, began in 1967. The Gini coefficient was 0.397 then. It was 0.468 in 2009. America’s income divide is becoming greater.

There are a nearly endless list of reasons for the number of low-income people have increase. The Census gives the most concise explanation.

“Researchers believe that changes in the labor market and, to a certain extent, household composition affected the long-run increase in income inequality. The wage distribution has become considerably more unequal with workers at the top experiencing real wage gains and those at the bottom real wage losses. These changes reflect relative shifts in demand for labor differentiated on the basis of education and skill. At the same time, long-run changes in society’s living arrangements have taken place also tending to exacerbate household income differences. For example, divorces, marital separations, births out-of-wedlock, and the increasing age at first marriage have led to a shift away from married-couple households to single-parent families and nonfamily households. Since nonmarried-couple households tend to have lower income and income that are less equally distributed than other types of households (partly because of the likelihood of fewer earners in them), changes in household composition have been associated with growing income inequality.”